Financials

2004 Third-Quarter Financial Statements

ENTRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

(in thousands, except per share data)
Three Months Ended
September 30		 Nine Months Ended
September 30

2004
2003
2004
2003
(unaudited) (unaudited)
Revenues:
Product $6,495 $5,788 $18,384 $22,495
Services and maintenance 14,843
 14,250
 45,482
 41,687
Total revenues 21,338
 20,038
 63,866
 64,182
Cost of revenues:
Product 827 1,273 2,954 3,810
Services and maintenance 6,637 7,534 21,473 22,375
Amortization of purchased product rights 175
 -
 198
 568
Total cost of revenues 7,639
 8,807
 24,625
 26,753
Total gross profit 13,699
 11,231
 39,241
 37,429
Operating expenses:
Sales and marketing 5,757 8,758 18,592 27,739
Research and development 3,944 5,953 12,860 18,182
General and administrative 3,305 3,223 9,793 10,073
Impairment of purchased product rights - - - 1,134
Restructuring charges and adjustments -
 2,233
 -
 13,623
Total operating expenses 13,006
 20,167
 41,245
 70,751
Income (loss) from operations 693
 (8,936)
 (2,004)
 (33,322)
Other income (expense):
Interest income 359 377 904 1,409
Foreign exchange gain (loss) (118) (92) 440 (372)
Loss from equity investment (296) (212) (673) (450)
Minority interest in subsidiary (2) - (2) -
Write-down of long-term strategic investments -
 -
 -
 (2,780)
Total other income (expense) (57)
 73
 669
 (2,193)
Income (loss) before income taxes 636 (8,863) (1,335) (35,515)
Provision for income taxes 143
 91
 206
 411
Net income (loss) $493
 $(8,954)
 $(1,541)
 $(35,926)
Weighted average common shares used
Basic 62,684 63,407 63,138 63,601
Diluted 62,932 63,407 63,138 63,601
Net income (loss) per share
Basic $0.01 ($0.14) ($0.02) ($0.56)
Diluted $0.01 ($0.14) ($0.02) ($0.56)

ENTRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)
December 31
2004
 2003
(unaudited)

ASSETS
Cash and marketable investments $100,623 $104,668
Accounts receivable, net of allowance for doubtful accounts 15,946 18,771
Other current assets 3,877 3,980
Property and equipment, net 5,679 7,678
Purchased product rights, net 2,971 -
Goodwill, net 13,036 11,186
Long-term equity investment 1,103 660
Other long-term assets, net 1,780
 1,809
Total assets $145,015
 $148,752

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accruals $14,669 $15,811
Accrued restructuring charges 31,425 35,426
Deferred revenue 23,220 16,615
Long-term liabilities 1,399
 228
Total liabilities 70,713 68,080
Shareholders' equity 74,302
 80,672
Total liabilities and shareholders' equity $145,015
 $148,752
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